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In early 2019, Eli Lilly(NYSE:LLY) made an $8 billion bet on the future of cancer treatment with an $8 billion buyout offer for Loxo Oncology and its pipeline of targeted cancer therapies. On Friday, the jewel at the center of the acquisition, LOXO-292, earned approval from the FDA to hammer away at aggressive tumors driven by RET mutations.

Highly targeted

Under the brand name Retevmo, Lilly's RET inhibitor is approved in the U.S. to treat very specific groups of patients with tumors originating in their lungs and thyroid glands. Retevmo's an easy-to-swallow capsule designed to stop mutated RET kinases from driving tumor growth, a condition that describes a low double-digit percentage of thyroid cancers.

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Aggressive RET mutant tumors are also found in around 2% of patients with non-small cell lung cancer (NSCLC). While NSCLC isn't the most frequently diagnosed malignancy, it claims more lives than any other. Retevmo could become the go-to treatment for enough patients to drive annual sales above $1 billion within a couple of years following its approval.

Accelerated approval

The FDA approved Retevmo based on signs of tumor shrinkage, not actual survival outcomes. An impressive 64% of NSCLC patients treated with Retevmo in the second-line setting responded to the new therapy. Among those that hadn't already been treated with standard chemotherapy, Retevmo shrank tumors 84% of the time.

The FDA could withdraw or curtail Retvmo's accelerated approval if the treatment fails to provide a survival benefit in two confirmatory trials that are enrolling patients at the moment.